The Government of the Netherlands has made available a Euro 20 million (US$24.3 million) grant to support Indonesia’s institutional strengthening and capacity building – two central themes of the Dutch development cooperation worldwide. The resources support Indonesia’s goals of good governance, improved public services to the poor (especially in education and water), fostering an improved investment climate, and accelerating development in Eastern Indonesia.

The program builds on existing partnerships between the Royal Netherlands Embassy in Jakarta with the World Bank. This grant is for Fiscal Years 2005-2009 and is administered by the World Bank as a Trust Fund.

This Dutch Grant supports five areas of special importance:

A. Improving Governance

Areas that are funded from this part of the Trust Fund are for instance administrative and civil service reform, decentralization technical assistance and support to anti-corruption initiatives. Furthermore, Improving Accountability and Transparency in Public Expenditures is a topic that will also be at the heart of improving good governance in Indonesia.

B. Investment Climate

A Rapid Response Facility operates, the purpose of which is to enhance the policy debate on investment climate issues, and improve policies that aim to alleviate bottlenecks in the investment climate. Also, a Financial Innovation facility is functional which seeks to alleviate the latter constraint by providing innovative solutions to critical policy and operational issues in three areas: strengthening the existing financial sector in Indonesia and reducing its systemic vulnerability; developing new institutions and instruments that will diversify the financial sector and enable better mobilization of long-term domestic resources; and develop financial instruments to enhance the access of the poor to the financial sector.

C. Education

The program assists the Ministry of National Education to develop an internal program monitoring and evaluation system and to develop a capacity building program for service providers at all levels.

D. Water and Sanitation

Indonesia is falling short in meeting the Millennium Development Goals in the area of water and sanitation, and the poor are hit hardest. For example, when it comes to safe drinking water the poorest of the poor have less than one quarter the access of the rich. As a result, the poor pay water vendors up to five-times more than the rich who use piped water. The lack of sewerage systems and solid waste facilities has caused widespread contamination of surface and ground water, as well as destroying sensitive eco-systems. The World Bank and the Royal Netherlands Embassy have already agreed to several programs in the field of water and sanitation as well as in irrigation. A facility for quick turn-around technical assistance in the area of water supply and sanitation complements these programs, and supports the Bank in developing timely and thorough policy advice to central and local governments on innovative ways to expand access of the poor to water and sanitation.

E. Eastern Indonesia Program

The underdeveloped region of Eastern Indonesia poses particular challenges in investment climate, service delivery, and governance. The grant supports a new Eastern Indonesia Multi-Donor Office which acts as a support centre for donor activities in Eastern Indonesia, and builds knowledge and access to information that will stimulate and accelerate development in the Eastern regions of Indonesia.

Under consideration is the partly financing of a UNDP program in Papua in the form of a grant of appr. € 7 million.

For more information on the World Bank Program in Indonesia, please visit:  www.worldbank.or.id or contact Ms Retno Widuri or Ms. Bolormaa Amgaabazar from the TF Management Support Unit, email:  rw iduri@worldbank.org/  bamgaabazar@worldbank.org; tel: 021-5299-3087.